Economic Outlook

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Bashar must begin his term in power by focusing on rectifying domestic affairs, the economic predicament being first on his list. Syria’s economic performance in recent years under president al-Asad has been uninspiring at best. Growth rates are sluggish and national resources are becoming considerably scarce. The country faces the hardship of creating enough jobs for the younger generation and attempts to diversify and modernize the economy have failed. According to official sources, the local unemployment rate reached 9.5 percent in 1999. Nonetheless, this official figure does not accurately depict the Syrian labor market; in practice, the unemployment level is close to 20 percent. Accordingly, many Syrian job seekers cross the border to Lebanon to earn a living. The country's nearly 17 million citizens will reach 25 million by 2025, thus necessitating the allocation of $4 billion this decade for job creation alone. The foreign trade situation is also bleak. The total value of exports in 1999 amounted to less than $3 billion (consisting mainly of crude petroleum and cotton), while imports hit nearly $3.8 billion.

A major barrier to Syria’s economic development has been the seclusion policy that the regime first adopted decades ago. This caused potential investors to shun this promising market. Altogether, incoming foreign investment into Syria was set at $100 million last year, most of which came from Syrian expatriates and Arab entrepreneurs. The newly established government has been trying to address this issue and it recently decided to encourage investment from abroad by relaxing restrictions on land ownership.

Local businessmen saw this move as a step in the right direction, in spite of the fact that many other measures must be taken in order to revive the fragile economy. An absolute makeover is required by the banking sector, which is still owned and operated by the government. Early indications demonstrate that Bashar plans to overhaul this sector. One of the new leader’s first moves has been to allow foreign banks into the country to operate in free zones. According to this measure, banks with a minimum capitalization of $11 million in foreign exchange will be permitted to transfer and receive foreign currency without restriction and will not be obliged to pay taxes. By permitting foreign banks to operate freely, Bashar seems determined to create a parallel banking system that will circumvent the country’s present financial apparatus – controlled by his late father’s loyalists – without directly challenging their entrenched interests.